Monday, November 13, 2006

Watched Pot

As many people have pointed out in the comments section, it's been a very long time since we've had any kind of sustained downturn. And at this point, "sustained" means more than one trading session! The market is firmly up the 12,000 mark and seems to have its hands perched haughtily on its hips, daring anyone to sell.

It's easy to forget just how complacent and calm this market is. Just look at the NASDAQ recently compared to the wild days of 1997-2002. The market exploded higher over a three year period (and unwound the entire gain just as quickly). Yet over the most recent three years, we've been calmly and carefully moving higher at a deliberate (and annoying) pace.


The Russell 2000, which I'm a bit obsessed with, is in a no man's land at this point. If it breaks below the rectangle I've drawn, odds are very strong that we've seen the top put in. If it breaks above it, we could be in for more of the same bullish behavior. The calendar is not working in our favor. November, December, January are not known as bearish months. But I'm shurring off seasonality at this point, given how useless it was in September and October.


The $SPX, shown below on a minute bar basis, has lost its steam. It was on a solid tear (see the up arrow) for weeks on end. Recently, although it hasn't plunged by any means, it's definitely a bit pooped. Tomorrow morning's retail report and CPI figures (both of which come out an hour before the opening bell) will almost certainly provide some short-term direction.


The gold and silver index, which I am short, fell nicely at the opening bell this morning, but it recovered for most of the day. I've got a stop in here at 142.60.


I'll probably have more to say tomorrow, after the latest economic figures come out.

17 comments:

trader said...

Thanks Downosedive,

See last msg from earlier posting !

h. lovil said...

Nasty market for bears.

CTSH broke it's trend-line nicely. I bought the puts. Crazy P/E. Unp on no news, now tonite we hear it is being added to S and P. Guess now I know why it was going up.

Look at KBH. CEO leaves due to crooked options and the stock goes up and keeps going AH.

This is NOT a normal market- somthing is pushing. Hate to be a PPT paranoid person, but when things go up on news that might mean the company is in serious litigation and the CEO may go to jail- it just doesn't make sense!

PB said...

It's always darkest before dawn. Junk is being bought like it's going out of style. Homebuilders have actually been one of the strongest gainers in this latest rally. The markets are doing a fine job of ignoring reality. Housing foreclosures are increasing fast. Almost 1 out of every 90 households are in some type of foreclosure (in major metro areas) This year has been an outlier, reversion to the mean has been delayed but not forgotten. Just wondering what people will say for excuses why they didn't sell at DOW +12K.

I'm staying short as the upside is limited and I am cushioned against it. Just waiting for Bush to attack Iran.

z-stock said...

Here's an idea for a short.
NYX @ $96/98,
I think it has finally run out of steam.

Here's some double tops,coming...
not enough forward eps to break through....

OS @ 57/58
AL @ 47/48
CRDN @ 54/55
DE @ 89/90
ESRX hit it's 20 day...

and...
Tim
I think you have the hardest job in the world.....with the current maket behavior...
It's very important to know when a stock is running out of steam ...
I read that one guy bashing you because you don't do calls....
that guy's the ignorant guy. He doesn't understand this site...

On the way up...you make some money, and on the way down, you make some more money, that's how it works....

The goal is to extract the maximum amount of profit from each trade...
z-stock.....

h. lovil said...

They have let correct 0.35 now for another ramp up!

downosedive said...

OK trader.! Just thought its interesting to look at the same 'object', but see something different to others

Sanjay Sola said...

Market is heading up. there's no stopping it. too many people calling top here.

PB said...

so the reason this market is going up is because there are too many bears? Seriously now, that is one lame excuse to be buying stocks. Sentiment indicators are just that, indicators. The market is starting to break down, go ahead go long for a few more points, but the risk is to the downside here. Draw some trendlines on the DOW and you'll see that it's gonna take a lot more than what this market has to break out of it. 12,200 is proving to be formidable resistance. We might break it to the upside by 100 or so points, but that will not last more than a few days

PB said...

P.S.

I'm not watching the markets!

Dee81 said...

Now is not the time for shorts. Dow just past through 12200. So much for resistance eh PB? Will the market correct one day? Of course it will, and once the primary trendline and the last 2 significant lows are taken out (confirmation of lower highs and lower lows) then Ill be aggressively short. But in a market of higher highs and higher lows you have no choice but to go 80% long (There will always be stocks breaking down/up no matter the market direction). Technical Analysis 101: The market is always right.

Dont get me wrong I love this site to death and once my bear criterias are met Ill be scouring this blog for some tasty shorts!

PB said...

WOW! Now I'm broke! Anyone need a handy-man? PB needs a job!

Andrew755 said...

100 points in 20 minutes...thats enough... I've had it. I'm going to cash..... this market has gone mad.

MANIPULATED... Unless there is a reason why the market ran up 100 points in 20 minutes and volume increased thats exactly what it is.....

1 down day in a week and a half.... stocks that are so extended that you

Call it capitulation I call it PATHETIC.

Denver_Investor said...

It's time for some re-education.

RECESSIONS are a very good thing; buy stocks when one appears on the horizon.

BUY stocks in the weakest sectors with the worst outlooks. Example: Homebuilders.

NEWS: Ignore any and all bad news. Or, treat it as good news; along with any actual good news that might appear.

BE BULLISH AT ALL TIMES: The Federal Reserve and other central banks will rescue you from any potential downturn by creating an ocean of money that has to go somewhere and will prop up all stock prices.

----

there...go forth and make money

peace

PB said...

since when did stocks become an alternative investment to bonds? Supposedly it's the money coming out of bonds that is driving this market up. These two asset classes have very different risk profiles. I'm still trying to come to grips with this never ending rally.

Someone please enlighten me as to who these mofo's are!

PB said...

Hey, it's the greatest story never told! Supposedly intelligent investment managers buying everything in sight. The more risky the better!

h. lovil said...

my KBH short went, my QID was dumped.

The market won, I lost.

downosedive said...

andrew755 and pb - guys Im suffering with you - I didnt think I could loose going short but as at this crazy crazy rally, im now just lost for words. I guess global warming has finally killed every single bear...........and yes andrew755, a 100 points up in 20mins, but why? why? why?why?